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Frederikshavn, Denmark.

High Street in transition

Until the internet arrived, it used to be an advantage to have a local presence in retail. Shop owners were as much experts in relationship building as they were in inventory management. Customers who had complaints and needed a repair were easily taken care of; it was all an integrated part of an uncomplicated business model that often served a social need on the side.

The economy of scale and the internet changed most of that. In this new world, it was easier to give up a relationship than to overpay for a purchase, at least for the younger generation, and products became so reliable they hardly needed a repair. If a coffee maker didn’t work to our liking, we could buy a different model and give the old one to our kids. And the meaning of relationships changed too: the next time we visited a store there was a new young face behind the counter, someone who didn’t care how our kids were doing in school.

Article imageThe High Street is in a rapid change, moving from a place where we used to buy everything from furnitures to music records and kitchen appliances, to a public living space with coffee shops, restaurants and foreign exchange stores. This has been going on for some time, but the change has accelerated since the economic crisis of 2008, and because how e-commerce has gained acceptance amongst new generations. Because High Street can’t exclusively be filled with restaurants, coffee houses, and foreign exchange stores, traditional retailing must change also and find new ways to serve their customers.

The cost of keeping an inventory in the back and being under pressure from price comparisons on the internet creates a low-margin business that is unsustainable and can’t be fixed with the best customer service in the world. The answer is not to digitize the business and jump on the e-commerce train. Most businesses are simply too small for that, unless they sell something really different. What we instead see is traditional stores turning into show rooms for products and brands. This has been going on for some time in the fashion industry, and in other luxury segments, but the concept is becoming popular amongst technology companies and with companies like Amazon, who have taken a traditional business model to a whole new level. These kind of shops have no backroom with inventory, and the experience they offer is everything but ordinary. Instead, customers order items from a large show screen or exhibition, and the goods are delivered to their door a few days later. Technology is mixed with shining brass and wood, giving the place a rustic exclusivity you want to take home. The secret is logistics and distribution, and to understand that the only thing that can make up for low margins is volume. It’s a business model that fits only the most brand aware companies, those who have the financial muscles and wit to create a new relationship with their customers.